Eli Goldratt has everybody -- from Big Eight accounting firms to Junior Achievement students -- marketing his manufacturing scheduling system.
Say you have a service or a product that is so new, or so complex, that potential customers find it difficult to understand. Or a product that addresses needs so universal that prospective buyers don't even recognize them. Or a product that competes with so many look-alikes that it's impossible for shoppers to differentiate one from another. How do you market it?
This is a common enough dilemma, and it is getting more so with the proliferation of highly technical products, the increasing ease of entry into manufacturing, and a host of other factors. "In marketing complex products, the bottom line is that we know very little," says Regis McKenna, chairman of Regis McKenna Inc., a Palo Alto, Calif.-based marketing consulting firm. "All of the marketing models taught at business schools are based on consumer and industrial products that have been around for decades. . . . Not even the most technical people can distinguish between 150 different personal computers."
While McKenna sees the problem as particularly acute with high-technology products, other industries are far from immune. Take banking, for example, where a prospective customer may grow light-headed trying to distingush between Bank A's and Bank B's no-load daily dividend qualifying funds. Even consultants aren't spared, as Creative Output Inc.'s Eli Goldratt discovered. And few companies in any field have met the challenge with as much imagination and success as the colorful Goldratt.
Creative Output, founded in 1979, had as its principal product a software-based manufacturing scheduling system, called OPT (Optimized Production Technology), created by five people, including Goldratt, an Israeli physicist. In the world of operations, scheduling is not exactly a new concern, and the number of vendors touting systems is legion. You may choose, for instance, from among MRP, MRP II, JIT, Kanban, PYMAC, SIOPS, PRISIM, and Caposs. Although each approach may have its special virtues, it's hard to distinguish one from another in terms of what they do. The results in increased output, reduced inventories, and so on, look much the same no matter what the system. And that includes OPT.
Like its competitors, OPT is complex. To complicate marketing matters even further, it is also iconoclastic. Its basic premise is that manufacturing shouldn't be judged by such traditional gauges as unit cost and machine utilization, but instead by net profit. Goldratt argues that plants are generally set up to maximize the efficiency of individual operations, but not that of the overall operation. The key is recognizing "bottlenecks." Imagine, for example, a product that requires four parts from four separate machines. One machine produces one part an hour; the other three each produce one part a minute. The first runs all the time, but if the other three are kept running, they simply build up unnecessary inventory. When Goldratt suggests that the optimum results may be achieved by shutting those three machines down, or letting workers take an extra coffee break, the concept requires some extra explaining from his sales force.
"Our people guided clients, helped them to use the software well, and there were nice bottom-line results," says Goldratt, whose firm, by 1983, had revenues of $10 million and OPT installations in more than 20 Fortune 500 companies. "But as soon as they left, deterioration began. We were digging our own grave, and very fast." The problem: those responsible for buying OPT understood the system, but most of those who used it -- from foremen to machinists -- didn't undertand the underlying philosophy at all. As soon as Creative Output left the plant, they went back to doing things the way they'd done them before.
So Creative Output changed its tactics, shifting from the software to a heavily educational approach. It delivered a series of programs and seminars to an ever-widening circle of its clients' employees, and saw distinct improvements. "The revolving door [of consultants into and out of plants] stopped spinning," notes Goldratt. But the company's revenues, which had slipped 17% during the changeover period between 1983 and 1985, and its profits, which had disappeared, showed no signs of recovering by early '85. "We had beautiful results, no deterioration," he recalls, "but how to sell it?"
Goldratt wanted something new, inexpensive, simple, and engaging. In what now seems a bit of inspired insight, he tried what had never been tried before, a device that has succeeded beyond his dreams. The company produced a steamy novel, The Goal, Excellence In Manufacturing, to get its message across.
A full moon is shining through the bedroom window and into my eyes. The night is still. I look at the clock beside me, which says it's 4:20 a.m. Next to me in bed, Julie is sleeping. . . .
When I woke up, I was having a hightmare. It was all about the plant. I was running up and down the aisles and Bill Peach was chasing me in his crimson Mercedes. . . .
Now I'm too much awake, and too aware of the problem I was trying to forget this past evening with Julie for me to fall back to sleep. . . .
The Goal, a manufacturing romance conceived by Goldratt and written by himself and freelance author Jeff Cox, is the tale of Alex Rogo, a division manager for UniCo, whose plant and marriage are both about to fold. But with the help of the OPT-like advice of an old college professor (Jonah), Rogo manages to placate his boss (Bill Peach) and hold onto Julie, his wife.
The novel, introduced last spring, was an overnight sensation. Creative Output set out copies at trade shows, mailed a few to old friends, and left some behind when calling on potential clients. And the response, the orders, and the new business flowed. Quality magazine serialized it, and the American Production & Inventory Control Society (APICS) is planning to do the same. Of the 40,000 copies distributed, 30,000 were sold, often by the case (at a minimum of $12.95 each for softback). The book made it onto Walden Books's approved-to-buy list. Several foreign-language editions appeared, and one firm, Teijin Seiki Co., had the manuscript translated into Japanese.
Last year, one month after the book's publication, Creative Output introduced a second marketing/educational device focused on the OPT system. Thoughtware is a computer game -- complete with a smiling, PAC-Man-like cursor named OPTIE -- that lets users rack up profits, or go bankrupt, by scheduling a manufacturing plant. (Goldratt, for what it's worth, went broke on his second keystroke the first time he played.)
Though more expensive than the book (with two different versions costing $60 and $200), the game is equally contagious. When the company set up 10 PCs at the Society of Manufacturing Engineer's Autofax show and at APICS's national conference, everyone from janitors to chief executives competed aggressively for top honors. Some of the salespeople have loaned Thoughtware to prospective clients, and copies have wound up in classrooms. "I even had my daughter running it," says James Fitzsimmons, a professor of management at the University of Texas.
Accordint to Creative Output, the impact of these "transfer media," as it calls its marketing tools, has been striking. Revenues, which stood at $10 million in 1983, are expected to be double that in '86, while cost of sales has plunged. Profits have tripled (to an estimated $5 million -- plus for fiscal '86). Revenues, once dominated by software (75% of sales), are now less dependent on that one item (software is 40%, with additional education, consulting, and transfer media sales accounting for the difference).
"We almost don't have to do any selling," says Goldratt with a flourish of his ever-present Havana cigar. "The client is calling us before we have the chance to call him."
One of those who called was Steve Riggins, vice-president of Justus Development & Investment, in Fort Lauderdale, Fla., who had somehow gotten hold of a copy of The Goal. JDI, a real estate development firm, had acquired a small manufacturing company in Chanute, Kan., that sounded disturbingly like UniCo. "When were you in our plant?" Riggins (who saw himself in the character of Bill Peach) asked Creative Output president Robert E. Fox. "I wish I'd read the book three weeks ago, when I was out there, trying to decide whether or not to keep the factory open." Fox dispatched a Creative Output SWAT squad, but it was too late: in January, the plant closed.
Riggins, however, continues to send copies of The Goal to friends.
The timing for Kenneth A. Burns, another Goal reader, was more propitious. Burns is vice-president of manufacturing at Morse/HEMCO Co., a $5-million-a-year gauge manufacturer in Holland, Mich., that found itself in pretty desperate straits. "We were in a very serious cash-flow situation," Burns recalls, "and the company's survival was at issue." HEMCO spent $15,000 on a two-day Creative Output seminar in December, and, though it has only recently embarked on the OPT path, has already seen inventories cut and deliveries improved. In part because of those changes, Burns is now confident that HEMCO will survive.
Creative Output is making money not only from the business its transfer media brings in. It is also making money from the sale of the marketing devices themselves. And, in an interesting twist, it is getting others to do its marketing for free.
"It's absolutely great," says Dean Saluti, a professor of Management Information Systems at Simmons College, who, like a number of other college instructors, now uses The Goal as a text in several classes. "It's a simulation of real life -- of the honest-to-God conflicts and pressures of manufacturing -- and the students love it. I've never encountered anything quite like it before."
Creative Output has opened up its courses to accounting firms (Arthur Young, Deloitte Haskins & Sells, and Price Waterhouse have taken part) and to other consulting companies, and has conducted free seminars for the academic community. "No other consulting company has ever taken academia under its wing in the way that Creative Output has," says Saluti. "We've gone back to our classrooms, our professional associations, and our publications, and are spreading the OPT word."
Creative Output is currently working with Junior Achievement Inc., a national business-education program involving some 140,000 high school students, to produce several OPT-oriented courses.
All of which should mean referrals until the year 2500.